Government Type: Communist state.Branches: Executive--president (head of state); Chairman, Council of Ministers (prime minister and head of government); nine-member Politburo; 49-member Central Committee. Legislative--109-seat National Assembly. Judicial--district, provincial, and a national Supreme Court.Political parties: Lao People's Revolutionary Party (LPRP)--only legal party.Administrative subdivisions: 16 provinces, one special region, and Vientiane prefecture. Flag: A red band at the top and bottom with a larger blue band between them; a large white circle is centered.

PEOPLELaos' population was estimated at about 5.6 million in 2001, dispersed unevenly across the country. Most people live in valleys of the Mekong River and its tributaries. Vientiane prefecture, the capital and largest city, had about 569,000 residents in 1999. The country's population density is 23.4/sq. km.

About half the country's people are ethnic Lao, the principal lowland inhabitants and politically and culturally dominant group. The Lao are descended from the Tai people who began migrating southward from China in the first millennium A.D. Mountain tribes of Miao-Yao, Austro-Asiatic, Tibeto-Burman--Hmong, Yao, Akha, and Lahu--and Tai ethnolinguistic heritage are found in northern Laos. Collectively, they are known as Lao Sung or highland Lao. In the central and southern mountains, Mon-Khmer tribes, known as Lao Theung or midslope Lao, predominate. Some Vietnamese and Chinese minorities remain, particularly in the towns, but many left in two waves--after independence in the late 1940s and again after 1975.

The predominant religion is Theravada Buddhism. Animism is common among the mountain tribes. Buddhism and spirit worship coexist easily. There also is a small number of Christians and Muslims.

The official and dominant language is Lao, a tonal language of the Tai linguistic group. Midslope and highland Lao speak an assortment of tribal languages. French, once common in government and commerce, has declined in usage, while knowledge of English--the language of the Association of Southeast Asian Nations (ASEAN)--has increased in recent years.

HISTORYLaos traces its first recorded history and its origins as a unified state to the emergence of the Kingdom of Lan Xang (literally, "million elephants") in 1353. Under the rule of King Fa Ngum, the wealthy and mighty kingdom covered much of what today is Thailand and Laos. His successors, especially King Setthathirat in the 16th century, helped establish Buddhism as the predominant religion of the country.

By the 17th century, the kingdom of Lan Xang entered a period of decline marked by dynastic struggle and conflicts with its neighbors. In the late 18th century, the Siamese (Thai) established hegemony over much of what is now Laos. The region was divided into principalities centered on Luang Prabang in the north, Vientiane in the center, and Champassak in the south. Following its colonization of Vietnam, the French supplanted the Siamese and began to integrate all of Laos into the French empire. The Franco-Siamese treaty of 1907 defined the present Lao boundary with Thailand.

During World War II, the Japanese occupied French Indochina, including Laos. King Sisavang Vong of Luang Prabang was induced to declare independence from France in 1945, just prior to Japan's surrender. During this period, nationalist sentiment grew. In September 1945, Vientiane and Champassak united with Luang Prabang to form an independent government under the Free Laos (Lao Issara) banner. The movement, however, was shortlived. By early 1946, French troops reoccupied the country and conferred limited autonomy on Laos following elections for a constituent assembly.

Amidst the first Indochina war between France and the communist movement in Vietnam, Prince Souphanouvong formed the Pathet Lao (Land of Laos) resistance organization committed to the communist struggle against colonialism. Laos was not granted full sovereignty until the French defeat by the Vietnamese and the subsequent Geneva peace conference in 1954. Elections were held in 1955, and the first coalition government, led by Prince Souvanna Phouma, was formed in 1957. The coalition government collapsed in 1958, amidst increased polarization of the political process. Rightist forces took over the government.

In 1960, Kong Le, a paratroop captain, seized Vientiane in a coup and demanded formation of a neutralist government to end the fighting. The neutralist government, once again led by Souvanna Phouma, was not successful in holding power. Rightist forces under Gen. Phoumi Nosavan drove out the neutralist government from power later that same year. Subsequently, the neutralists allied themselves with the communist insurgents and began to receive support from the Soviet Union. Phoumi Nosavan's rightist regime received support from the U.S.

A second Geneva conference, held in 1961-62, provided for the independence and neutrality of Laos. Soon after accord was reached, the signatories accused each other of violating the terms of the agreement, and with superpower support on both sides, the civil war soon resumed. Although the country was to be neutral, a growing American and North Vietnamese military presence in the country increasingly drew Laos into the second Indochina war (1954-75). For nearly a decade, Laos was subjected to extremely heavy bombing as the U.S. sought to destroy the Ho Chi Minh Trail that passed through eastern Laos.

In 1972, the communist People's Party renamed itself the Lao People's Revolutionary Party (LPRP). It joined a new coalition government in Laos soon after the Vientiane cease-fire agreement in 1973. Nonetheless, the political struggle between communists, neutralists, and rightists continued. The fall of Saigon and Phnom Penh to communist forces in April 1975 hastened the decline of the coalition in Laos. Months after these communist victories, the Pathet Lao entered Vientiane. On December 2, 1975, the king abdicated his throne in the constitutional monarchy, and the communist Lao People's Democratic Republic (LPDR) was established.

The new communist government imposed centralized economic decisionmaking and broad security measures, including control of the media and the arrest and incarceration of many members of the previous government and military in "re-education camps". These draconian policies and deteriorating economic conditions, along with government efforts to enforce political control, prompted an exodus of lowland Lao and ethnic Hmong from Laos. About 10% of the Lao population sought refugee status after 1975. Many have since been resettled in third countries, including more than 250,000 who have come to the United States.

Over time, the Lao Government closed the re-education camps and released most political prisoners. From 1975 to 1996, the U.S. resettled some 250,000 Lao refugees from Thailand, including 130,000 Hmong. By the end of 1999, more than 28,900 Hmong and lowland Lao had repatriated to Laos--3,500 from China, the rest from Thailand. Through the Office of the United Nations High Commissioner for Refugees (UNHCR), the International Organization for Migration (IOM), and non-governmental organizations, the U.S. has supported a variety of reintegration assistance programs throughout Laos. UNHCR monitored returnees for a number of years and reported no evidence of systemic persecution or discrimination against returnees per se. UNHCR closed its Laos office at the end of 2001.

GOVERNMENT AND POLITICAL CONDITIONSThe only legal political party is the Lao People's Revolutionary Party (LPRP). The head of state is President Khamtay Siphandone. The head of government is Prime Minister Boungnang Volachit. Government policies are determined by the party through the all-powerful nine-member Politburo and the 49-member Central Committee. Important government decisions are vetted by the Council of Ministers.

Laos adopted a constitution in 1991. The following year, elections were held for a new 85-seat National Assembly with members elected by secret ballot to 5-year terms. This National Assembly, expanded in 1997 elections to 99 members, approves all new laws, although the executive branch retains authority to issue binding decrees. The most recent elections took place in February 2002 when the assembly was expanded to 104 members.

Laos maintains an embassy in the United States at 2222 S Street NW, Washington, D.C. 20009 (tel: 202-332-6416).

ECONOMYLaos is a poor, landlocked country with an inadequate infrastructure and a largely unskilled work force. The country's per capita income in 1999 was estimated to be $241. Agriculture, mostly subsistence rice farming, dominates the economy, employing an estimated 85% of the population and producing 51% of GDP. Domestic savings are low, forcing Laos to rely heavily on foreign assistance and concessional loans as investment sources for economic development. In FY 1999, for example, foreign grants and loans accounted for more than 20% of GDP and more than 75% of public investment. In 1998, the country's foreign debt was estimated at $1.9 billion.

Following its accession to power in 1975, the communist government imposed a harsh, Soviet-style command economy system, replacing the private sector with state enterprises and cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal and foreign trade.

Within a few years, the Lao Government realized these types of economic policies were preventing, rather than stimulating, growth and development. No substantive reform was introduced, however, until 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decisionmaking authority and lost most of their subsidies and pricing advantages. The government set the exchange rate close to real market levels, lifted trade barriers, replaced import barriers with tariffs, and gave private sector firms direct access to imports and credit.

In 1989, the Lao Government reached agreement with the World Bank and the International Monetary Fund on additional reforms. The government agreed to expand fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. In addition, it also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. A liberal foreign investment code was enacted and appears to be slowly making a positive impact in the market. The pace of reforms has slowed since the onset of the Asian Financial crisis.

These reforms led to economic growth and an increased availability of goods. However, the Asian financial crisis, coupled with the Lao Government's own mismanagement of the economy, resulted in spiraling inflation and a steep depreciation of the kip, which lost 87% of its value from June 1997 to June 1999. Tighter monetary policies brought about greater macroeconomic stability in FY 2000,dropped to less than 1% per month.. The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role.

FOREIGN RELATIONSThe new government that assumed power in December 1975 aligned itself with the Soviet bloc and adopted a hostile posture toward the West. In ensuing decades, Laos maintained close ties with the former Soviet Union and its eastern bloc allies and depended heavily on the Soviets for most of its foreign assistance. Laos also maintained a "special relationship" with Vietnam and formalized a 1977 treaty of friendship and cooperation that created tensions with China.

With the collapse of the Soviet Union and with Vietnam's decreased ability to provide assistance, Laos has sought to improve relations with its regional neighbors. . Within a year of serious border clashes in 1987, Lao and Thai leaders signed a communique, signaling their intention to improve relations. Since then, they have made slow but steady progress, notably the construction and opening of the Australian-financed Friendship Bridge between the two countries.

Relations with China have improved over the years. Although the two were allies during the Vietnam War, the China-Vietnam conflict in 1979 led to a sharp deterioration in Sino-Lao relations. These relations began to improve in the late 1980s. In 1989 Sino-Lao relations were normalized.

Laos' emergence from international isolation has been marked through improved and expanded relations with other nations such as Australia, France, Japan, Sweden, and India. Laos was admitted into the Association of Southeast Asian Nations (ASEAN) in July 1997 and applied to join WTO in 1998.

Laos is a member of the following international organizations: Agency for Cultural and Technical Cooperation (ACCT), Association of Southeast Asian Nations (ASEAN), ASEAN Free Trade Area (AFTA), ASEAN Regional Forum, Asian Development Bank, Colombo Plan, Economic and Social Commission for Asia and Pacific (ESCAP), Food and Agriculture Organization (FAO), G-77, International Bank for Reconstruction and Development (World Bank), International Civil Aviation Organization (ICAO), International Development Association (IDA), International Fund for Agricultural Development (IFAD), International Finance Corporation (IFC), International Federation of Red Cross and Red Crescent Societies, International Labor Organization (ILO), International Monetary Fund (IMF), Intelsat (nonsignatory user), Interpol, International Olympic Commission (IOC), International Telecommunications Union (ITU), Mekong Group, Non-Aligned Movement (NAM), Permanent Court of Arbitration (PCA), UN, United Nations Convention on Trade and Development (UNCTAD), United Nations Educational, Social and Cultural Organization (UNESCO), United Nations Industrial Development Organization (UNIDO), Universal Postal Union (UPU), World Federation of Trade Unions, World Health Organization (WHO), World Intellectual Property Organization (WIPO), World Meteorological Organization (WMO), World Tourism Organization, World Trade Organization (observer).

U.S.-LAO RELATIONS The United States opened a legation in Laos in 1950. Although diplomatic relations were never severed, U.S.-Lao relations deteriorated badly in the post-Indochina War period. The relationship remained cool until 1982 when efforts at improvement began. For the United States, progress in accounting for Americans missing in Laos from the Vietnam War is a principal measure of improving relations. Counternarcotics activities also have become an important part of the bilateral relationship as the Lao Government has stepped up its efforts to combat cultivation; production; and transshipment of opium, heroin, and marijuana.

Since the late 1980s, Joint U.S. and Lao teams have conducted a series of joint excavations and investigations of sites related to cases of Americans missing in Laos. In counternarcotics activities, the U.S. and Laos are involved in a multimillion-dollar crop substitution/integrated rural development program. Laos also has formed its own national committee on narcotics, developed a long-range strategy for counternarcotics activities, participated in U.S.-sponsored narcotics training programs, and worked to improve law enforcement measures to combat the narcotics problem.

U.S. Government foreign assistance to Laos covers a number of areas. Such aid includes support for Laos' efforts to suppress opium production, training and equipment for a program to clear and dispose of unexploded ordnance, school and hospital construction, and public education about the dangers of unexploded ordnance and about HIV/AIDS. Economic relations remain very limited. In August 1997, Laos and the United States initialed a Bilateral Trade Agreement and a Bilateral Investment Treaty. This agreement requires congressional action to come into force.